All Ords holds above 5000

An upbeat lead from Wall Street and optimism over a rescue package for Greece provided the backdrop for the S&P/ASX All Ordinaries to close above 5000 points for the first time since September 2008.

European markets were up about 0.1 per cent in early trading on Monday evening, while predicted opening gains for the Dow Jones Industrial Average overnight had been trimmed to 10 points, according to futures markets.

The All Ordinaries climbed 38.7 points to close at 5011.6, its first close above 5000 points since September 24, 2008. The broader market is now up 2.64 per cent in 2010. The benchmark S&P/ASX 200 index gained 36.2 points to 4984.3, not far off its intraday high of 4986.1, and is up 2.33 per cent so far this year.

Shares shot higher at the open and maintained that level through the session. Investors were in an upbeat mood after the Dow Jones Industrial Average traded above 11,000 points on Friday night in New York and ended 0.64 per cent higher at 10,997.35. The US reporting season begins this morning when Alcoa reports after the close of Wall Street trading.

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Adding to market confidence, at the weekend, the 16 nations that make up the euro currency backed a more than €30 billion ($43 billion) emergency aid mechanism for Greece, which would allow the debt-laden country to borrow from the International Monetary Fund and euro-zone governments at rates significantly lower those demanded by the market.

Key regional markets were lower on Monday, though. Japan’s Nikkei bucked the trend with 0.42 per cent to 11,251.9. Hong Kong’s Hang Seng was down 0.32 per cent at 22,138.17 while China’s Shanghai Composite was down 0.51 per cent at 3129.26.

Domestic housing finance data was shown to have slipped 1.8 per cent in February, which was a steeper decline than consensus of a 1 per cent fall. Though it was the fifth straight monthly decline, the data’s effect was more pronounced on the Australian dollar than the equity market, which was relatively unmoved.

With the benchmark index just 15.7 points away from the 5000 mark, investors remain upbeat.

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“Most of the news coming through is still skewed to the positive side," Tribeca Investment Partners portfolio manager Sean Fenton said. He was tipping the major resource companies to outperform the Big Four banks over the rest of the year.

In local economic news, housing finance fell for a fifth consecutive month, dropping 1.8 per cent in February, more than the expected 1 per cent fall.

The decline was blamed on a drop in first home buyers seeking housing finance after the government’s stimulus payments were wound back.

First home buyers now account for 18.1 per cent of all dwellings financed compared to a peak of 28.5 per cent in May last year.

Separately, Reserve Bank of Australia assistant governor
Guy Debelle
said interest rates were not far from what could be considered normal, in a testimony to politicians in Sydney.

Earlier this month, the RBA hiked rates by a 0.25 percentage points to 4.25 per cent and indicated further hikes would follow as the economy continued to recover. Markets are pricing in a 27 per cent chance of a rate rise in May, while the cash rate is expected to be about 5.25 per cent in the next 12 months.

Resource stocks performed strongly on Monday, boosted by continued corporate activity in the coal mining sector and higher base metal prices.

“Corporate activity is firing up interest in the market again," Mr Fenton said, and “we’re probably likely to see a bit more of it".

Speculation Xstrata would launch a rival bid for
Macarthur Coal
pushed shares in the coal miner up 97¢, or 6 per cent, to $16.52.

If Xstrata chooses to join the battle, its bid will follow offers from US energy giant Peabody and locally-based
New Hope Corporation
. Peabody has offered to pick up Macarthur for $14 a share, while New Hope has tabled a 2.7 for 1 all scrip deal, valuing Macarthur at about $14.50.

The London Metal Exchange closed at its highest since August 2008, up 1 per cent on Friday. Nickel has been one of the strongest base metals this year climbing 36 per cent.

The strong gains continued to help local producers. Panoramic Resources was up 7¢ to $2.65 on the exchange on Monday. Rival Independence Group added 6¢ to $4.96 and Mincor climbed 9¢ to $2.28.

The diversified miners were also stronger. BHP Billiton added 55¢ to $44.45 and
Rio Tinto
was up $1.19 to $80.66.

Murchison, Gindalbie and Mount Gibson are all prime takeover targets with separate Chinese miners owning a significant stake in each.

Of the 46 companies in the S&P/ASX 200 Materials Index only nine finished the day in negative territory.

Meanwhile, Macquarie Group equity strategists are tipping the S&P/ASX 200 to climb about 12 per cent year-on-year to 5564 points.

Industrials and resources are expected to offer the best returns with analysts saying near-term earnings risks remained to the upside.
Hills
Industries, the manufacturer of the iconic Hills hoist clothes line, was the best performing industrial stock on the local exchange adding 10¢, or 3.7 per cent, to $2.76.

Maintenance service groups also turned in a robust performance. Bradken added 25¢ to $8, touching a 12-month high and Emeco Holdings was up 2.5¢ to 7¢.

The major banks all finished in positive territory. Australian and New Zealand Banking Group was up 21¢ at $25.36, Commonwealth Bank of Australia finished up 26¢ at $58.40, National Australia Bank added 5¢ to $27.65 and Westpac climbed 12¢ to $27.84.

Shares in Sigma Pharmaceuticals were up 5¢ to 52¢ on speculation Archer Capital and Ironbridge were in talks to take the company private.